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Outline of Issues to Cover in Negotiating Recording Agreements


By Edward (Ned) R. Hearn

1.       Initial Term – Duration

2.         Options

(a)        Number.

(b)        Exercise mechanism.

(c)        Duration of each option.

(d)        Seven-Year Rule and LC 2855.

(i)         Enforceability.

(ii)        Measuring criteria.

(iii)       Remedies/notice.

(e)        Minimum compensation per person (injunctive relief issues – CCP §526; CC §3423).

(i)         $9,000 year one.

(ii)        $12,000 year two.

(iii)       $15,000+ per each of years three through seven.

3.        Product Commitment.

(a)        Number of albums/initial and each option term.

(b)        How many masters for an album.

(c)        Includable "elements " for an album: audio; visual.

(d)        Time period by which album is to be delivered to company by artist.

4.        Defining "Acceptable " Masters for Albums.

(a)        Technically satisfactory.

(b)        "Commercially " satisfactory.

(c)        "Satisfactory " as a defined term.

(d)        Who determines? Final say.

5.         "Artistic " Content and Control; Final Say.

(a)        Producer.

(b)        Selections/arrangements.

(c)        Recording facilities.

(d)        Session players.

(e)        Concept/style.

(f)        Mixes/re-mixes.

(g)        Sequencing.

(h)        Singles.

(i)         Release patterns.

(j)         Style of promotion; marketing; PR.

6.         Recording Budgets.

(a)        Amount and how calculated?/"album ".

(b)        Who determines?

(c)        Who controls?

(d)        When paid out?

7.         Advances.

(a)        Amount and how calculated?/"album ".

(b)        How paid out?

(c)        When paid?

8.         Record Fund – Aggregation of Recording Budget and Advances.

(a)        Who controls?

(b)        When paid out?

(c)        How calculated per album?

9.         Producer.

(a)        Who selects?

(b)        Artist as producer.

(c)        Scope of responsibilities.

(d)        Amount of producer fee and who determines?

(e)        Producer royalty – amount and who determines?

(f)        Recoupability and how measured?

(g)        Direct accounting and payment by label; letter of direction.

10.       Defining "Deliverable " Elements and Delivery Times.

(a)        Working masters and "final " masters.

(b)        Clearances; releases; guest artists; session musicians; sample clearances; first use mechanicals; compulsory mechanicals.

(c)        Due dates.

(d)        Effects of late delivery.

(e)        Reasons for late delivery.

11.       Ownership of Masters and Working Elements.

(a)        Work-for-Hire as a copyright concept.

(b)        Transfer of copyright and reversion/termination rights.

(c)        Distinguish from compositions on the master (see Paragraph 14).

(d)        Scope of use rights in record company/any limitations.

(e)        Scope of territory.

(f)        Physical media.

(g)        Digital downloading and streaming/Internet usages.

12.       Royalty.

(a)        Concept of points as royalty.

(b)        Domestic royalties.

(c)        Foreign royalties as a fraction of domestic royalty rate.

(d)        Formula for computing royalty points to cents.

(i)         Royalty base price.

(ii)        Sales against which points computed.

(iii)       Non-royalty-bearing sales.

(1)        Promotional.

(2)        Free goods.

(A)       Net effective price.

(B)       Royalty measuring price.

(C)       Discounted sales greater than fifty percent (50%) of average wholesale price.

(D)       Cut-outs; scrapped; artist sales.

(E)       Licensee sales; employee sales.

(iv)       Container charges/packaging costs.

(v)        Sales other than traditional, primary sales, and percentage of reduction from base royalty, such as:

(1)        Overseas.

(2)        Key outlets.

(3)        Premiums.

(4)        Special compilations.

(5)        Samplers.

(6)        Mid-line.

(7)        Budget-line.

(8)        Flat fee license.

(9)        Record clubs.

(10)      Joint recordings.

(11)      Coupling.

(12)      Non-traditional sales.

(13)      Direct marketing and key outlet sales.

(14)      On-line sales.

(A)       On-line order with off-line delivery.

(B)       Digital downloads.

(C)       Streaming performance royalties.

(vi)       Other configurations besides compact discs/cassettes:

(1)        DAT.

(2)        12 ", 7 ", EPs.

(3)        CDV.

(4)        Video.

(5)        Minidiscs.

(6)        DVDs.

(7)        Digital downloads.

(8)        Digital streaming.

(9)        "To be’s ".

(e)        Recoupment:

(i)         Identifying which costs are recoupable.

(ii)        Sources of income to be used for recoupment.

(iii)       Cross-collateralization.

13.       Videos.

(a)        Scope of exclusivity.

(b)        Who determines whether to do?

(c)        Who determines:

(i)         Budgets?

(ii)        Concepts/styles/story-line/song?

(iii)       Producer/director?

(iv)       Promotional and/or commercial use?

(d)        Ownership.

(e)        Cost responsibility.

(f)        Recoupability from royalties.

(i)         Percentage of budget to recoup.

(ii)        Source of recoupment.

(g)        Royalty on commercial use.

14.       Compositions and Publishing.

(a)        Publishing or co-publishing to company (define difference).

(b)        Company’s reasons for.

(c)        Artist’s reasons against.

(d)        Income share on co-publishing; publishing.

(e)        Cross-collateralization issues.

(f)        Synchronization license regarding videos; promo/commercial.

15.       Controlled Composition Clause.

(a)        Define.

(b)        Computation of statutory mechanicals.

(c)        Statutory rates.

(i)         Full statutory.

(ii)        Minimum statutory.

(iii)       Percentage of (minimum) statutory.

(iv)       Statutory for digitally distributed "phonorecords ".

(d)        Ceilings on mechanical payments measured by configuration and number of compositions, and percentage of statutory.

(i)         Album (X 10 to 12) (LP, cassettes, CD, DAT).

(ii)        7 " (X 2).

(iii)       12 " (X 2, X 3).

(iv)       EP (X 4, X 5).

(v)        DVD (X 3, X 4) (synchronization regarding audio-visual).

(e)        Impact of paying full statutory rate for non-controlled compositions on measuring ceilings on mechanicals.

(i)         Charging excess to controlled mechanicals.

(ii)        Charging excess to record royalties.

16.       Exclusivity (Scope) to Record Company.

(a)        Description of artist’s services.

(i)         Audio recordings.

(ii)        Coupling of visual images.

(iii)       Webcastings.

(iv)       Broadcasting.

(b)        Restrictions regarding:

(i)         Re-recording for phonorecords (time period).

(ii)        New recordings regarding visual soundtracks.

(iii)       Films: performance; recording; scoring.

(iv)       Video projects: performance; recording; scoring.

(v)        Television programs and variety shows (e.g. HBO specials).

(vi)       Featured artists.

(vii)      Side person work.

(viii)     Re-recording for commercials.

(ix)       Re-recording for television/film/video soundtracks.

(c)        Prior unreleased recordings.

(d)        Unique services/minimum annual compensation (CA).

(e)        Name and likeness uses (merchandising).

(f)        Territorial scope.

17.       Accountings/Statements/Payments/Audits.

(a)        Timing on accountings/reserves/statements/payments/audits.

(b)        Restrictions on audits.

(c)        Time bars/concurrent auditors’ usage.

18.       Warranties.

(a)        No contractual restrictions.

(b)        No copyright infringements.

(c)        No TP liabilities.

(d)        Union requirements.

(e)        No activities that will interfere with contract.

(f)        No recording for others.

(g)        Notice to company if any such event occurs.

19.       Indemnities/Remedies.

(a)        Suspension.

(b)        Freeze royalties.

(c)        Injunction.

(d)        Damages.

20.       Group Member Leaving Provision.

(a)        Terminate as to all members.

(b)        Terminate as to some members and continue as to other members.

(c)        Continue separately as to each member segment still intact.

(d)        Terms of deal to apply to all continued members in respective aggregations:

(i)         Existing contract.

(ii)        Basic company artist contract.

(iii)       Re-negotiated deal.

(iv)       Minimum/maximum term.

20.       Artist’s Name, Image, and URL.

(a)        Who owns artist name?

(b)        Who owns artist URL?

(c)        Limitations, if any, on name, image, and URL uses during the term and after the term by record company; by artist; by third parties.

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